Kevin Rose demonstrates Square for the iPhone

Digg founder Kevin Rose has become an investor of the Square iPhone payment system (which was in turn created by another social networking visionary, Twitter co-creator Jack Dorsey), and so he’s posted an informative video tour of the technology on YouTube.

The pitch is great: Square allows anyone to take credit card payments on their iPhone, just by purchasing a cheap card swiping dongle and the Square app. Square takes a slice off the top and passes the rest of the money onto you. This technology isn’t just aimed at the small businesses: you could use it to collect rent, donations, loans from your parents, blackmail money, you name it.

The technology also looks good. An amount is entered, a card is swiped, a signature is taken, and then an email is sent to the customer along with the GPS co-ordinates and Google Maps location of where the purchase took place. It doesn’t seem like a system that is optimized to turn around transactions quickly — the signature and email entry portions of the process seem likely to hold up a line — but it works about as well as can be expected.

Security is the biggest, most obvious concern I have about Square. I have no doubt Square itself is on the up-and-up, but I don’t know that I would be particularly willing to hand my credit card over to a stranger walking up to me with a cheap plastic dongle sticking out of his iPhone.

What’s stopping someone from jailbreaking their iPhones and programming a dummy app that looks like Square, but just records the credit card numbers? Even if the Square system is a totally secure way to make credit card payments, the iPhone is a vulnerable platform, and that’s worth some worry.

About the author:

John Brownlee is a Contributing Editor. He has also written for Wired, Playboy, Boing Boing, Popular Mechanics, VentureBeat, and Gizmodo. He lives in Boston with his wife and two parakeets. You can follow him here on Twitter.